When to Refinance Your Mortgage

When you are refinancing a mortgage, doing so at a lower rate isn’t always the right decision. It can benefit you to sit back and put some time and thought into your decision.

Refinancing your mortgage multiple times can help reduce your financial benefit overall. Those who refinance, looking for the next low mortgage, often usually end up paying a hefty price by leaving a trail of closing costs.

There are only some circumstances when refinancing your mortgage makes sense. Sometimes it may be more practical to keep your current loan.

When to Refinance

Making sure the timing and circumstances make sense before refinancing your mortgage is a must. It’s common to be in the house for awhile before the decision to refinance makes sense.

According to Bankrate's 2012 closing cost survey, the national average for closing costs on a $200,000 loan was $3,754. The fees in this survey didn’t include taxes, insurance or prepaid items.

Homeowners, when deciding whether to refinance, typically are advised to consider how many months of lower payments it will take to recover the closing costs of the new mortgage.

While this isn’t the worst advice to follow, it doesn’t really help measure your savings. Savings are a result of a lower interest expense, not lower monthly mortgage payments.

You'll find that if you get a lower interest rate but extend the mortgage term, you might end up spending more in interest. For example, replacing a mortgage that has 20 years remaining with a 30-year mortgage will result in a higher interest expense over the life of the new loan.

There are two calculations to consider when trying to figure out whether refinancing with a loan term extension will help you save: First is where the new loan has the same term as the old loan, and second where the new loan is the length of your planned refinance. Compare the interest savings to see if refinancing helps reach your financial goal.

A majority of people refinance their monthly mortgage to make their payments more affordable. A longer loan term or a lower interest rate both work towards lowering the monthly payment. Affordability could be a motivator as long as homeowners understand they might not be minimizing their total interest expense.

Although short-term savings are important, they aren’t the only factor to consider when refinancing. Refinancing in order to get out of an adjustable rate mortgage (ARM), a piggyback mortgage, an interest only mortgage or other mortgage provisions are reason enough to take on refinancing a mortgage.

Homeowners with ARM’s, in some cases, would be fine staying with their loans, especially in they do not plan on being in the loan long term or if the reset rate on their mortgage isn’t financially threatening. 

Orange County Mortgage Rates

With mortgage rates falling in Orange County, homeowners all over are refinancing. With rates dropping day by day, they have been able to refinance which has been saving homeowners tons of money. Borrowers across Orange County are jumping at any opportunities to refinance and lower their rates.

Applications to refinance home loans jumped 66 percent nationwide in April to the highest percentage since 2013. Home owner purchase loans are also steadily increasing. After a drop in benchmark U.S. treasury yields as well as the decrease in oil prices, interest rates have been steadily decreasing leading to mortgage rates declining at a fast pace.

The decrease in rates was unexpected but the action by homeowners refinancing was booming. Even though a large number of homeowners received similar rates during the refinancing boom of 2011-13, plenty of borrowers can still benefit from today’s rates. With rates continuing to drop, borrowers who refinanced as recently as six months ago are coming back to refinance again.

Lenders and brokers said it’s worth it to refinance if you can get a decrease of ¼ to 3/8 of a point off your mortgage using a no-cost loan. Your rate is even lower if you pay fees or points upfront, with lower payments offsetting those costs in as little as two or three years.

However, not everyone should refinance. If your mortgage has a prepayment penalty, you’ve had your mortgage for a long time or you plan to move within the next few years, you should not refinance your loan. Also, not everyone is benefiting from this refinance frenzy. Servicers who rely on existing loans for income lose that money when loans get paid off early. Brokers and originating mortgage companies also may have to repay fees on loans that are refinanced within six months.

Despite these factors, most homeowners are benefiting from the decrease in mortgage rates in Orange County.

Mortgage Foreclosure: When It Occurs and How To Avoid It

Mortgage foreclosure is a legal process by which a mortgage holder (mortgagee) regains possession of your home after a default. The most common type of default is the borrower failing to make mortgage payments. However, your mortgage default may include other things, as for example, failure to pay property taxes or maintain insurance.

Receiving Notification from Lender

If you default on your mortgage, the mortgagee or lender will notify you by mail. It is important to read all correspondence from your lender to make sure you don’t miss any legal notices. You cannot avoid foreclosure by claiming you did not read a legal notice. If you do not cure the default, the mortgagee will foreclose by complying with the legal requirements for foreclosure in your jurisdiction. At a minimum, you will get some additional notices in the mail. After the mortgagee takes the necessary legal steps, an official will sell your property at an auction. The best first step in avoiding foreclosure is to read all the correspondence you get from your lender.

Borrowers who can’t make a scheduled payment should contact their lenders as soon possible. Lenders have loss mitigation departments that will try to work out payment arrangements with borrowers who are down on their luck.

Understanding Your Mortgage Documents

Another key to avoiding foreclosure is to understand what your mortgage requires in a default situation. The details of your obligation are spelled out in two documents: a promissory note and a mortgage (or deed of trust). The note documents the borrower’s agreement to borrow money and repay it according to a schedule. The mortgage creates a lien against the property and gives the mortgagee the right to foreclose if the borrower defaults. Both documents may offer the borrower options when the lender declares a default. Therefore, it is important to read your mortgage documents and understand their requirements.

Mortgages Insured by the Federal Housing Administration (FHA) or Veterans Association (VA)

Mortgages insured by the FHA or VA give borrowers the right to reinstate the mortgage after foreclosure proceedings have already started, by catching up on their delinquent payments, curing any other defaults, and paying the lender’s expenses. To reiterate, the key to avoiding foreclosure is reading the relevant documents and complying with their terms.

Getting Help

Beware of foreclosure prevention companies. They are mostly scams. They don’t have any special rights or abilities that benefit the borrower. Some charge high fees and do nothing at all or simply contact the lender and try to negotiate a modification. You can do that yourself. Others are after your property. They will convince you to sign the property over to them and rent it or repurchase it on a land contract. If you fail to pay, you’ve lost the property. As a tenant or land contract purchaser, you’ve got fewer rights to redeem or reinstate the deal.

There are some legitimate non-profit agencies that offer genuine help. For instance, some organizations will assist homeowners with a mortgage payment or two. Legal Aid offices usually have lists of these organizations. Government-insured mortgages, like those issued by the FHA, also offer borrowers certain loan modification options. The FHA certifies non-profit housing counselors with whom you can discuss your options. You can contact the FHA at (800) 569-4287 for a list of certified counselors.

You can also seek advice from an attorney who specializes in mortgage foreclosures.

Foreclosure Prevention Act of 2008

The Foreclosure Prevention Act of 2008 offers additional options for some homeowners who otherwise risk foreclosure. The Act creates a new mortgage program called “HOPE for Homeowners”, effective from October 1, 2008--September 30, 2015. The program offers FHA insured loans to homeowners who are currently unable to pay their mortgages. To participate, they must:

Live in the home;
Have acquired their mortgage before January 1, 2008;
Have mortgage payments plus taxes and insurance that amount to at least 31% of their income;
Have a current lender who is willing to give up the difference between the current mortgage balance and pay 3% of the loan balance to FHA;
Not have any other additional loans against the property and agree not to take any out for five years;
Agree to pay FHA a share of any equity or appreciation in the property if they sell it within five years; and
Agree to the new mortgage being a 30-year fixed mortgage.


Courtesy of: http://real-estate-law.freeadvice.com/real-estate-law/mortgage_matters/mortgage-foreclosure.htm

These Charts Will Tell You Where the Housing Market Is Headed This Year

The Federal Reserve is preparing to raise its benchmark interest rate for the first time since 2006. Yet the gradually healing housing industry — one of the biggest beneficiaries of rock-bottom borrowing costs in this economic recovery — isn't panicking. 

Because policy makers have signaled they will raise their key rate slowly and incrementally, potential buyers are less likely to rush into the market ahead of the first rate hike, said Columbus, Ohio-based Nationwide Insurance Chief Economist David Berson. Besides, mortgage rates, while no longer at a record low, are still half their historical average in Freddie Mac data back to April 1971.

So if not the Fed's looming interest rate move, then what? Here are a few things analysts say we should be watching instead to determine how the housing market will perform this year.  

1. Inventory

To entice customers, offer variety. Even the most eager buyer would be restrained by a lack of inventory, said Svenja Gudell, senior director of economic research at Seattle-based real-estate website Zillow Group Inc. These days the options are limited.

Inventories in March notched their first year-over-year drop since December 2013, according to data compiled by Seattle-based property-data provider Redfin Corp.:

And here is where an increase in interest rates could make matters worse, said Gudell. Further down the road — say, in a year or more — owners with mortgages at currently low rates will think twice about putting their homes on the market, for fear of racking up higher borrowing costs in new mortgages. This is known as "lock-in effect."

While that may prompt more spending on home renovations as homeowners sit tight, less churn also could mean a hobbled housing market, she said. 

2. Prices

What's worse, inventory probably won't balloon until prices surge to prompt owners who are still underwater to put their houses up for sale. Housing costs already are rapidly nearing their level in December 2007, when the last downturn began: 

3. Affordability for first-time buyers

Americans hunting for more affordable homes have had an especially hard time, with credit constraints and scant supply holding back sales at the lower end. First-time buyers, too, have accounted for an unusually weak share of overall purchases during the expansion. They need to return to increase the churn:

4. Credit availability

Lenders have been slow to ease mortgage requirements after the popping of the housing bubble helped trigger the last recession. Mortgage Bankers Association data that take into account factors such as credit scores and loan-to-value ratios illustrate the lingering challenge for those with less-than-pristine borrowing histories:

Lawrence Yun, chief economist at the National Association of Realtors in Washington, said he's hopeful for a turnaround. Government lenders are reducing down payment requirements and private banks see a "profit motive" in boosting mortgage availability, he said.

"Any negative impact of rising rates I think will be easily compensated by an opening up in the credit box," said Yun.

5. Wages

Bigger paychecks will be a key ingredient for stronger home sales even as mortgage rates rise, said Anika Khan, a Wells Fargo Securities economist in Charlotte, North Carolina.

"What could move the needle is stronger wage growth — a lagging indicator," said Khan. "Let's say it lags a year — then we could trickle into 2016 and actually see a little bit more activity happen."

courtesy of: Michelle Jamrisko, bloomberg.com

6 Painless Ways to Pay Off Your Mortgage Years Earlier

Chances are your home mortgage is the largest debt you'll ever have. How would you like to pay it off and run your mortgage contract through the shredder a lot faster than the 30 years most homeowners sign up for? Let's consider some ways to painlessly pay off your home loan sooner. You can choose to do it a little faster or a lot. In some cases, you'll scarcely notice the added expense.

1. Make Biweekly Mortgage Payments

Since there are 12 months in a year, homeowners make 12 monthly mortgage payments. But if you make half-sized payments every two weeks (biweekly), you'll make 26 half payments, the equivalent of 13 full payments, essentially making 13 monthly payments every year rather than the usual 12.

To go this route, call your lender and ask the best way to do it. Some lenders will set you up with biweekly payments. Or you might simply prefer to send in the extra payments by mail or electronically. Whenever you make any extra payment, however, be sure to designate it "apply to principal." Otherwise, the lender may treat the extra as a prepayment of your next regular monthly payment.

Use a calculator like this one from the Mortgage Professor to see your savings. Example: According to this calculator, if you have a 30-year fixed rate mortgage at 3.8 percent, making biweekly payments would save $20,573 in interest over the life of the loan and pay off your mortgage four years earlier. That's a big bang for not many extra bucks.

One thing to avoid: "mortgage acceleration" products and plans. Paying down your mortgage is an easy thing to do, and you shouldn't have to pay anything to do it. No expertise or pipeline to a higher authority is required. When you see ads and pitches for mortgage "acceleration" plans, programs and products, run the other direction. (Learn more about these gimmicks here.)

2. Pour Every Bit of Extra Cash Into Your Mortgage

Dedicate every bonus, raise and windfall, birthday, holiday and graduation gift you receive toward paying down debt. Obviously, the highest interest debt takes priority, but if you have an adequate emergency savings fund and your mortgage is your only debt, when extra money falls into your hands, don't even ask yourself what you'll do with it: Add it to your mortgage payment, designating it as additional principal.

It's possible you'll find better uses for extra cash than paying down your mortgage. For example, if your mortgage rate is 3.8 percent, but you can earn 5 percent on your money elsewhere, you're obviously going to be better off earning the 5 percent. Read Stacy's discussion about the pros and cons of using extra cash to pay down your mortgage.

3. Round Up Your Payments

The monthly payment on a $200,000 mortgage at 3.8-percent fixed over 30 years is about $932 a month. Get into the habit of rounding up that amount to $1,000. Or even $1,030, or $1,050. Do it on a regular basis, and you'll shave years off your mortgage while feeling little pain.

4. Make One Extra Payment a Year

Give yourself a holiday gift by making an extra payment at the end of the year -- or any time. Or, if you'd rather, add an amount equal to one-twelfth of your mortgage payment to each month's payment. For instance, with the $932 monthly payments in the example above, one-twelfth is $78. Add that to your normal payment, for a total payment of $1,010, and you'll shave 30 payments off a 30-year mortgage, paying it off in 26 years instead of 30.

5. Refinance Into a Shorter Loan

Nearly 90 percent of Americans who financed their homes in 2013 chose a 30-year fixed rate mortgage, according to Freddie Mac. One reason to do so: Monthly payments are lower on longer-term loans.

Only 8 percent chose 15-year loans in 2013. But those borrowers stood to save a lot of money over the long haul. You can, too, with a shorter duration mortgage. Follow these three steps to find out what you would save:

• Find current mortgage rates. A good general source is the Freddie Mac weekly mortgage market survey, updated every Thursday, but you can also look at real-life rates available in your area by visiting the Money Talks News mortgage search page.
• Decide if you want a fixed or adjustable rate mortgage. ARMs are typically cheaper but riskier. Here's how to decide if an ARM is right for you.
• See what you could save. Use HSH's amortizing mortgage calculator(choose "show the full table") to compare the costs and benefits of various options.

Here's an example: If you pay 3.8 percent on a 30-year fixed rate home loan of $200,000, your payment (principal and interest) will be $932 a month. After 30 years, you'll have repaid the $200,000 plus $135,489 in interest, money that could have gone to a college education for your kids or helped you retire earlier.

Reducing the term, or duration, of the loan usually saves money in two ways: You pay less total interest, and you often get a lower rate. When I researched this story, the average 30-year fixed mortgage rate was 3.8 percent. The average 15-year, fixed rate mortgage had an average interest rate of just 3.07 percent. The monthly payments on a $200,000 loan would be $1,388, which is $457 higher than the 30-year version. But you'd be done in half the time, paying only $49,823 in interest, instead of $135,489. That means you'd keep nearly $86,000 in your pocket rather than putting it in a lender's.

If you want to shorten your mortgage's term but 10 or 15 years feels too tight, the payments on a 20-year loan might be more comfortable.

6. Refinance and Just Pretend It's a Shorter Loan

If locking into a shorter mortgage with higher monthly payments feels scary (what if you hit a rough patch and need the money?), you can get much the same effect by refinancing - if rates are low enough to justify it -- into a cheaper 30-year mortgage but paying it off on a 15-year (or 10-year or 20-year) schedule.

You won't enjoy any lower rates offered for shorter-term loans, but you'll save heaps of money on interest. To stick with our sample mortgage, the new payment on your $200,000 (3.8 percent, 30-year fixed-rate) mortgage is $932. Go ahead and pretend you're on a shorter schedule. Your monthly payment would be:

• $1,190 to pay it off in 20 years.
• $1,459 to pay it off in 15 years.
• $2,006 to pay it off in 10 years.

Do the math yourself using the HSH, or any number of other free calculators. This option requires willpower, because you must choose a higher payment than you are required to make each month. But it gives you the flexibility of falling back to your smaller required payment if you need extra cash.

Is Refinancing Cost-Effective?

The last two options involve refinancing your home. Before considering them, decide if refinancing is a good move for you. Whether refinancing is worth it depends on the associated costs and how long you'll stay in the home. To be a good deal, you'll need to stay long enough to more than recoup your costs. Refinancing is loaded with costs, including, but not limited to:

• A lender's origination fee.
• A title search fee and title insurance.
• Taxes.
• A settlement professional's fees.
• The cost of pulling your credit report.
• An appraisal fee.
• State or county tax and/or transfer fees.

You can pay for these costs out of pocket at the time you refinance. Many lenders encourage borrowers to have the fees added ("rolled in") to their loan balance. But if you do, your monthly payment will grow and you'll pay additional interest.

Estimate Your Costs to Refinance

On average, homebuyers paid an average of $2,539 in closing costs for a $200,000 mortgage in 2014, according to Bankrate's annual survey. The cost of refinancing is similar. Here's rule of thumb: Expect to pay 2 percent to 5 percent of the loan amount to refinance, says Zillow.

Estimate your own costs using MyFICO's refinance calculator. Also, you can shop around by telling several mortgage lenders how much you want to borrow and asking for their estimates of fees. Again, the Money Talks News mortgage search tool is a good place to start. Don't give lenders consent to pull your credit until you're ready to actually apply for a loan.

courtesy of: dailyfinance.com

written by: Marilyn Lewis

Check Out SoCal Home Loans Today!

from SoCal Home Loans http://ift.tt/1QboVuu
via IFTTT

from SoCal Home Loans http://ift.tt/1H9Tkqt
via IFTTT

Check Out SoCal Home Loans Today!

from SoCal Home Loans http://ift.tt/1QboVuu
via IFTTT